Ch. 21

• What is the multiplier in economics?

  The ratio of change in equilibrium income
• What does the average propensity to consume represent?

  The proportion of income for consumer expenditure
• What is the marginal propensity to consume (mpc)?

  The proportion of additional income for consumption
• How is the marginal propensity to save (mps) defined?

  It is the proportion of additional income saved
• What does the marginal propensity to import (mpm) indicate?

  The proportion of additional income spent on imports
• What is the marginal propensity to tax (mpt)?

  The proportion of additional income that is taxed
• What does the marginal propensity to withdraw (mpw) represent?

  The proportion of additional income withdrawn from circulation
• How is the marginal propensity to withdraw (mpw) calculated?

  It is the sum of mps, mpm, and mpt
• What is the accelerator theory in economics?

  Investment level depends on change in real output
• What is an output gap?

  The difference between actual GDP and full employment GDP
• How is the output gap defined in economic terms?

  It is the difference between actual and potential GDP